Amazon Posts Another Blockbuster Profit
Amazon’s revenue jumped 31% including a 58% gain at its Amazon Web Services cloud computing unit. The company also more than doubled its operating margin, which historically has been razor thin, and issued a cheery outlook for the coming quarter.
The results show Amazon moving toward investors’ long-held hope of consistent profitability after a lengthy period of heavy investments and quarterly losses. The Seattle company hasn’t had five consecutive profitable quarters since 2012 as it pumped much of its revenue gains back into product development and operations, including massive warehouses to speed products to customers.
Chief Financial Officer Brian Olsavsky said Amazon isn’t changing its investment philosophy, noting the company plans to add 18 new warehouses in the current quarter compared with six a year earlier.
Amazon’s operating profit margin, a closely watched metric, was 4.2%. That is more than double the 2% year-earlier figure and a sign that the company is controlling costs.
Overall, Amazon posted a second-quarter $857 million profit, or $1.78 a share, compared with $92 million, or 19 cents a share, a year earlier. Sales rose to $30.4 billion from $23.19 billion. Analysts were expecting $1.11 a share on revenue of between $28 billion and $30.5 billion.
A big boost to results came from its Amazon Web Services cloud computing division, which sells access to computing power over the internet. AWS revenue in the quarter jumped to $2.89 billion, from $1.82 billion a year earlier. The unit appears on track to exceed Amazon Chief Executive Jeff Bezos’s goal of reaching $10 billion in sales this year.
In retailing, Amazon’s power is spilling over the confines of the online world. the company overtook Wal-Mart Stores Inc. by market value a year ago.
The $99-per-year Prime unlimited shipping membership has proven a big driver of online sales. Amazon has beefed up the program with exclusive streaming television shows and music as well as a one-hour delivery service for some goods in a number of cities. It said this month it will offer Prime for the first time to customers in India, where it has pledged $5 billion in investment since 2014.
Amazon has been casting about to find new ways to contain shipping costs that have accelerated more quickly than sales in recent quarters. That expense jumped 42% jump in this year’s first three months and 37% in 2015’s holiday quarter. For the second quarter, Amazon reported a 44% rise in shipping expenses to $3.36 billion.
The company has taken over more of its own delivery, including the expensive final leg of a package’s journey, known as the last mile. It is leasing 40 planes to carry goods and bought branded truck trailers.
As a result of its warehouse expansion, in particular, Amazon boosted its employment to 268,900, up 9.6% compared with the first quarter.
It forecast third quarter sales of between $31 billion and $33.5 billion, compared with analysts’ views of $31.63 billion.
